Investors stand in front of an electronic stock board at a securities brokerage in Shanghai, China, on Friday, June 9, 2017. (Photographer: Qilai Shen/Bloomberg)

Chinese Stocks Climb, Bonds Tumble Before Annual Policy Meeting

(Bloomberg) -- Chinese stocks jumped as investors bet next week’s economic policy meeting will signal further easing, spurring gains in property developers to infrastructure companies. Bonds tumbled the most in almost five months.

The Shanghai Composite Index advanced 1.2 percent at the close. A gauge of property stocks rose the most in seven weeks after China’s top economic planning body pledged to support bond issuance by highly rated companies, adding to hopes for policy easing. Anhui Conch Cement Co. was among top performers on an index of Hong Kong-traded Chinese companies. The yield on Chinese 10-year bonds headed for its biggest jump since July amid bets the nation will step up its support for the economy.

The mood was helped by signs of cooling in the U.S.-China trade tensions that have weighed heavily on stocks this year. The Shanghai benchmark has slumped 26 percent since late January. With a slowing economy also hurting sentiment, investors expect Chinese authorities to lean toward looser monetary policy to help growth, which has helped propel a rally in government bonds.

Chinese Stocks Climb, Bonds Tumble Before Annual Policy Meeting

China’s leaders will hold their annual economic policy-setting meeting from next Wednesday to Friday, according to people briefed on the plans. The gathering will lay down priorities for the coming year. The yield on Chinese 10-year debt rose 6 basis points to 3.35 percent, while the yuan climbed for a third day.

“The market has some positive expectations on the upcoming economic policy meeting,” said Yang Hai, an analyst at Kaiyuan Securities Co. “The latest news on policy easing of the property sector signals the deleveraging process has come to an end. Infrastructure stocks are leading gains today, which also shows that there is a change in policy expectations.”

Hong Kong’s Hang Seng Index rose 1.3 percent as of 3:31 p.m local time. In addition to property developers, Macau casino stocks were particularly strong, with a Bloomberg gauge of the sector advancing 3.8 percent. The Shanghai Composite Index rose the most since Dec. 3, while the SSE 50 Index of large companies gained 1.4 percent.

China State Construction Engineering Corp. was among the best performers among property-related companies in Shanghai, with a gain of 3.9 percent, while China Vanke Co. led peers on the Hang Seng China gauge. China Railway Group Ltd. also jumped.

More Comments

Steven Leung, executive director at Uob Kay Hian (Hong Kong) Ltd.:

  • Investors are anticipating some loosening signals from the economic work conference, in particular on the housing market
  • Some expect a looser tone, while others expect it to avoid mentioning the sector altogether. More likely the latter, as the government doesn’t want property prices to rise too much in 2019
  • Recent refinancing activities also shored up confidence in the sector
  • Some investors are bottom-fishing underperforming stocks, including developers

Zhang Gang, Shanghai-based strategist with Central China Securities Co.:

  • Investors are betting China will likely boost infrastructure investment and policy support at the conference, so there’s a lot of buying of related stocks
  • There’s a possibility that China will ease property controls. A lift in the housing market would be the most efficient solution to revive the economy

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